Fletcher in the News

Dean Bhaskar Chakravorti on Potential Decline of Home Prices in China

China Home Prices May Decline as Much as 15%, GreenOak’s Kalsi Says

Chinese home prices may fall as economic growth decelerates and income gains lag development, said panelists at the Bloomberg Link China conference.

“I don’t think China’s going to blow up, but prices are ahead of affordability,” Sonny Kalsi, a founder of GreenOak Real Estate and former global co-head of property at Morgan Stanley, said at the panel discussion in New York today. “At a minimum, it will take some time for growth to catch up to valuations. On the less generous end, we could have real price declines of 10 to 15 percent.”

China’s real estate market is caught between diverging goals of the central government and province heads and local mayors, according to the panelists. The central government has been trying to restrain speculation in housing, while local officials encourage development, they said. Reconciling those goals may influence whether a property crash can be avoided.

“Every mayor wants their own Gucci store,” said Bhaskar Chakravorti, senior associate dean of the Fletcher School at Tufts University. “You create jobs at the local level when you give away land, motivate developers. The external problem is the global economy is still not quite on steady ground, particularly in Europe, which has got a huge relationship with China.”